Can You Be Bought? Should You Accept Christmas Gifts?

by John J. Byrne

John is the Senior Federal Legislative Counsel and Compliance Manager in the Agency Relations of ABA's Government Relations Division. He is responsible for ABA's lobbying, regulatory and educational efforts on money laundering asset forfeiture, computer security, white collar crime, environmental liability, privacy and other general electronic banking issues.

During the holidays, people become more generous in both social and business settings. Choices must be made by our industry in the often murky area of conflicts of interest when gifts are offered by customers. Some would urge that we must avoid even the appearance of impropriety.

Since "trust" is pivotal to our reputation, it is critical that we review what constitutes acceptable behavior under law toward gift-giving customers. As it has been ten years since the signing of the Bank Bribery Act by then President Ronald Reagan, it is logical that we perform that review now. While it is up to the individual institution to decide how to respond to public perception toward "gift-giving", the law and the regulations under the Bank Bribery Act are clear.

News reporters have focused on corruption in government, leading Congress to enact gift rules in both the House and Senate. This becomes important for us as we write and adopt a policy about the acceptance of gifts from customers and clients, because the public may wish to hold their banker to the same standard (or better!) as a member of Congress.

Congressional Gift Acceptance
Of the two gift rules, the one for the House is the strictest. It prohibits any member or staff from knowingly accepting any gift.

The Senate requires that a member or staff may accept gifts which the member or staff "reasonably and in good faith" believes (1) that an individual gift is worth less than $50 and (2) that the cumulative value of any gifts received from one "source" in any calendar year is less than $100.

There are several exceptions to these rules covering widely attended events such as luncheons and charity events but the policy is clear--Congress no longer permits the acceptance of gifts.

With these actions as background, we'd better understand the 1986 law covering the banking industry.

Bank Bribery Act
As a young attorney for the American Bankers Association in early 1985, I was asked to work on an amendment to a 1984 section of the Comprehensive Crime Control Act (remember, all omnibus crime bills are enacted in even years-preferably right before Congressional elections).

The section in question was 18 U.S.C. 215 entitled the "Receipt of commissions or gifts for procuring loans." The '84 amendment to that section prohibited an officer, director, employee, agent, or attorney of any financial institution from directly or indirectly receiving, asking, or soliciting "anything of value?for or in connection with any transaction."

The statute also prohibited anyone from giving "anything of value" to that same group of financial institution representatives.

This change sent shock waves throughout the financial industry because, as the New York Times reported: "on October 12, a bribe was redefined so that, if any employee of a bank or thrift institution accepts anything of worth-no matter how seemingly trivial-it can be treated as a big time crime."

Overkill!
ABA's review of the law concluded that it was now criminal to give away promotional items at a business or trade show as well as the authorization of any payment to a customer (e.g., interest on an account) by a bank official!

ABA formed a coalition to lobby for a change in the law and we spent the good part of the 99th Congress convincing members of the absurdness of the changes. We constantly stressed that the bank bribery law should reach acts of corruption without allowing overzealous law enforcement officials to prosecute inconsequential conduct. Congress agreed and on August 4, 1986 the changes to 215 were signed into law.

18 U.S.C. 215 Amended in 1986
The industry sought changes to section 215 to make it an offense (subject to a maximum of 30 years in prison, by the way) to "corruptly" give, offer, or promise anything of value to an employee, officer, director, agent, or attorney of a financial institution with the intent to influence or reward that bank official in connection with any business or transaction of the institution.

Another part of the new section 215(d) was hotly debated before agreement was reached. The federal banking agencies were to jointly establish "guidelines" to assist in compliance with this section. While many banks already had code of ethics policies in place covering acceptance of gifts, Congress wanted a fresh look by the regulators. Now, all institutions have such codes and the agency guidance from 1987 ensures that banks have an excellent resource for modifying such policies.

They all indicate that a bank's code of conduct state that a bank's code of conduct should prohibit employees, officers, attorneys and agents from:

Soliciting for themselves or for a third party (other than the bank itself) anything of value from anyone in return for any business, service or confidential information of the bank and
Accepting anything of value (other than bona fide salary, wages, fees or other compensation paid in the usual course of business) from anyone in connection with the business of the bank either before or after a transaction is discussed or consummated.

These guidelines also contain some suggestions to the general prohibition against receiving gifts and also urge that self-dealing or trading on one's position should be prohibited.

Exceptions to the Gift Ban
There is a non-inclusive list of acceptable activity that will not violate 215 that should be placed in your code of ethics. For example:
Acceptance of gifts, gratuities, amenities or favors based on obvious family or personal relationships (such as those with the parents, children or spouse of a bank official) when the circumstances make it clear that it is those relationships, rather than the business of the bank concerned, which are the motivating factors;
Acceptance of meals, refreshments, travel arrangements or accommodations, or entertainment, not all or reasonable value, in the course of a meeting or other occasion, the purpose of which is to hold bona fide business discussions or to foster better business relations, provided that the expense would be paid for by the bank as a reasonable business expense if not paid for by another party (the bank may establish a specific dollar limit for such occasions); and
Acceptance of gifts of reasonable value related to commonly recognized events or occasions, such as a promotion, new job, wedding, retirement, Christmas or bar or bat mitzvah (the bank may establish a specific dollar limit for such occasions).

How to Avoid Ethical Problems
Every financial institution must decide for itself how to create a code of ethics and what should be made available to the public. Too liberal a bank code will not serve as a defense to a charge of corruption.

Disclosure is the key.
A carefully drawn policy, strictly enforced, will prevent problems and comfort customers.

Enjoy the holidays!

Copyright © 1997 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 7, No. 11, 9/97